Evidence of meeting #21 for Agriculture and Agri-Food in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was prices.
A recording is available from Parliament.
10:25 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
Okay, so that's 750 or 800.
In millions of dollars, what would the sales volume be in that?
10:30 a.m.
Executive Director, Canadian Association of Agri-Retailers
Well, crop inputs are in the $3 billion range across Canada. Fertilizers comprise probably 50% of that.
10:30 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
So we're talking about $1.5 billion in sales.
10:30 a.m.
Executive Director, Canadian Association of Agri-Retailers
For the total market, these gentlemen might actually have better figures than I would.
10:30 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
Where I'm going with this is that I find when you have those kinds of sales....
By the way, what kind of return on investment are you folks experiencing recently, in the last recorded year?
10:30 a.m.
Executive Director, Canadian Association of Agri-Retailers
Greg can probably give you some evidence. I'm hearing from our members that the market is brisk in terms of the amount of purchases this spring. However, margins are being pinched because sometimes, as Greg pointed out, we buy at certain prices but have replacement costs that are far higher.
How do we price our product? We tend to have a fixed margin on all our fertilizer, and unfortunately it does get pinched when the volatility affects it.
10:30 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
You still haven't answered the question. How much? What's the return on investment?
10:30 a.m.
Executive Director, Canadian Association of Agri-Retailers
Mr. Haney might give you a better response.
10:30 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
Just very quickly, because I'm really pressed for time.
10:30 a.m.
Executive Director, Canadian Association of Agri-Retailers
Twenty percent margins are probably extremely high. It's more like in the 10% or 15% range.
10:30 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
All this is to say, really, if each retailer were to make a $40,000 investment in their security and safety, do you not think that could be financed over the next 10 years? Looking for 75% of that cost...isn't that a cost of doing business; you're investing?
10:30 a.m.
Executive Director, Canadian Association of Agri-Retailers
Retailers are not in the business of public safety per se. We've always taken security very seriously and comply with regulations. An example is the AWSA pesticide guidelines.
But at this point we're taking on more onerous regulations that don't directly relate to what we do as a sector. We're asking for government help to get over the hurdle. We're also asking to do it efficiently, one time, so we don't have to do it 10 times, once every time we do a product upgrade on a code. We'd like to do it efficiently and make sure we secure Canadian—
10:30 a.m.
Conservative
Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON
So you wouldn't see this as a cost of doing business?
10:30 a.m.
Executive Director, Canadian Association of Agri-Retailers
No. I don't think we're necessarily in the business of public safety.
10:30 a.m.
Conservative
10:30 a.m.
Conservative
Carol Skelton Conservative Saskatoon—Rosetown—Biggar, SK
I was just going to say that it's interesting to hear you talking about China, because China entered into the grain markets last week and caused huge problems for Canadian farmers.
Pesticides and herbicides haven't gone up. Statistics tell us they've lagged behind fertilizer and energy as input costs.
Mr. MacKay or Mr. Haney, can you tell me what your thoughts are on that? Are they going to come up, keep up with the increase in the fertilizer and energy?
10:30 a.m.
Manager, , AgroCentre Belcan inc.
My call, back in October, would have been chemicals down.... Well, I like to refer to them as crop protection products, because now they aren't even chemicals. We're selling enzymes and additives. My call would have been down, but it's not happening.
Again, I'm going to go back to Mr. Miller's comment about the third world. I think Asia and China would take total offence to that. They have 10 times the middle class we do here in Canada, and that's our competition. As to South America, I don't think there's any security down in South America.
Mr. Lauzon mentioned that it's a cost of doing business. I don't think so. I think the cost of doing business is looking after our customer, supplying good food, safe food, for the Canadian economy at a good, reasonable price, and being there to service them.
So we're sitting here microanalyzing the situation when it's a global problem.
10:30 a.m.
Executive Director, Canadian Association of Agri-Retailers
Can I add one thing about pesticides? There's an element of brand in pesticides that there isn't so much in fertilizer. Fertilizer is strictly commodity, almost generic, to make the comparison.
Although there are generic pesticides available that are more commodity-like, the brand element creates a whole different market element there. Growers may want to purchase, as do retailers, specifically for those brands, to have those products available, because new science and technology delivers new products that are branded.
10:30 a.m.
Conservative
10:30 a.m.
Liberal
Ken Boshcoff Liberal Thunder Bay—Rainy River, ON
Thank you very much, Mr. Chairman.
I apologize for having to go into the House, not necessarily to hear Mr. Atamanenko, but I have to say you were brilliant.
It seems that this issue, from what we've heard in previous testimony--in terms of farm input costs--is one of the sore spots. When we hear your case today, it comes more into balance. I'm wondering what the process is to get some kind of reconciliation on these perspectives towards a solution that is actually workable.
When I look at the presentation by the CFI, I see a graph of U.S. fertilizer prices on page 2. Then I see a different one on Canadian fertilizer prices. Then on the third page--which I would think would give me a better perspective between the northern plains and western and eastern Canada--it's in a chart form. You can see it leads to only more questions in terms of our being able to determine if each of these graphs would compare U.S. fertilizer prices and Canadian fertilizer prices for farmers.
When we say farmers, are we always talking Canadian farmers? That's the first question.
If we had to sell this, say, to the government or to this committee in terms of being able to say, you're right, there isn't any kind of huge price disparity, that it's localized or it's occasional as opposed to being the norm.... You can see where I'm coming from in terms of our trying to reconcile this, to be able to address it or report to the government so they can act in a positive way, without making it look like last week the numbers showed that you guys could pay it off on Tuesday and it wouldn't be a financial cost to you because you're making so much money.
Please go ahead, panel.
10:35 a.m.
President, Canadian Fertilizer Institute
Clyde, can you respond to the first one, on working with others?
10:35 a.m.
Vice-President, Strategy and Alliances, Canadian Fertilizer Institute
Yes. We have gone to the George Morris Centre to take a look at the market conditions and to make some recommendations about things that farmers can do in order to better ensure that they have value from their fertilizer dollar. There are management tools that farmers can take advantage of, such as some opportunities for hedging; there are better techniques for negotiating with dealers. Certainly in terms of their fertilizer use, they want to go to soil test; they want to make sure they're taking advantage of the best management practices so they're getting the maximum benefit from every tonne of fertilizer they're putting on their farm. We're going to be releasing this report, which is an independent report from the George Morris Centre, in the next few weeks. We think it could be very helpful.
In terms of better information, Agriculture Canada spends a considerable amount of resources looking at this issue every year, as they have over the years. Certainly I think provincial governments are looking at this issue. There is quite a bit of other information as well. There is market information through Green Markets, which looks at the North American market. I think farmers have to work to be informed consumers, as does anyone in the market. They're in business like our agri-retailers are and like our companies are.
10:35 a.m.
Executive Director, Canadian Association of Agri-Retailers
Mr. Boshcoff, something came up when we were at the ARA conference in Las Vegas--that's the retail association in the United States. I'm not extremely familiar with this, but I'm going to throw out this concept and see if it's a potential that may help.
It's called fertilizer swaps. I guess it's the equivalent of what futures trading is in grain to fertilizers. It appears it's an art down there, more than a science. It's something that perhaps, if we were able to master it, might help flatten the future cost of fertilizers so that people can lock in pricing and at least be more stable in terms of forecasting their incomes and projections.
I don't know a lot about it. Our association is endeavouring to find out more information about fertilizer swaps and how it could help retailers, at least, buy more predictably. I understand there's a major problem with market liquidity. But maybe it's a tool that we could look to, and if we mastered it, perhaps it could help.
